Informational content of stock options.
Item
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Title
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Informational content of stock options.
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Identifier
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AAI9986312
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identifier
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9986312
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Creator
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Chern, Keh-Yiing.
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Contributor
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Adviser: Kishore Tandon
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Date
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2000
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Language
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English
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Publisher
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City University of New York.
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Subject
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Economics, Finance
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Abstract
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I provide empirical evidence on three areas of informational content of stock options listings and their subsequent trading. I test first whether increased and better quality information about a firm is introduced into the market by analyzing financial analysts' activities after options listings. I then test how momentum strategies work on both optioned and non-optioned stocks. Finally, I look into two corporate actions: stock splits and takeover (targets) and the resulting price reaction and financial analysts' activities.;My findings are consistent with the hypothesis that more analysts follow the same company after its options listing. In addition, I find a slight decline in the consensus estimate of the firm's future earnings and a wider dispersion of analysts' forecasts. However, analysts gradually become more accurate in their quarterly EPS estimates as measured by a smaller earnings surprise.;Earnings surprises and past analysts' forecast revisions of non-optioned stocks convey more informational content about the firms' future earnings ability. Momentum strategies can be implemented more successfully to exploit the earnings momentum by buying past non-optioned earnings winners and selling past non-optioned earnings losers.;I also find support for the hypothesis that the magnitude of the stock split announcement effect is larger for non-optioned stocks than for optioned stocks. The market adjusts more rapidly to the split announcement during the post-announcement period for optioned stocks than for non-optioned stocks. Besides, stock splits tend to precede strong revision of earnings estimates by analysts for both the optioned and the non-optioned stocks.;Takeover announcements of non-optioned targets seem to have more informational content than announcements of optioned target firms. Results on takeover announcements show that analysts revise estimates of the current fiscal-year EPS significantly for both optioned and non-optioned targets but they revise estimates of the next fiscal-year EPS significantly only for the non-optioned ones.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
